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MBF707: Monetary and Fiscal Framework in Islamic Finance

MBF707: Monetary and Fiscal Framework in Islamic Finance. COMSATS Institute of Information Technology (Virtual Campus). Review of the Last Lecture. Musharakah Introduction Legality of Musharakah and Mudarabah Definition of Musharakah Application of Musharakah.

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MBF707: Monetary and Fiscal Framework in Islamic Finance

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  1. MBF707: Monetary and Fiscal Framework in Islamic Finance COMSATS Institute of Information Technology (Virtual Campus)

  2. Review of the Last Lecture Musharakah • Introduction • Legality of Musharakah and Mudarabah • Definition of Musharakah • Application of Musharakah

  3. Lecture 06Musharakah&MudarabahModes of Financing

  4. What is Mudarabah? • Kind of partnership • One person gives money to another for the purpose of investment • Investor ------> Rab-bul-Maal Or Mudarabi • Fund Utilizer ------> Mudarib • RabbulMaal-------> No Right in Management

  5. Mudarabah v/s Musharakah • Investment • Participation in Management • Loss Share • In Partnership • RabbulMaal • Mudarib • Liability (limited vs unlimited) • Appreciation in the value of the assets

  6. Types of Mudarabah • Al Muqayyadah ( Restricted Mudarabah) • Al Mutlaqah ( Un-Restricted Mudarabah) • One Mudarib or more Mudaribs can be employed by the RabulMaal.

  7. Profit Distribution in Mudarbah At the Beginning : • Definite Profit Ratio agreed by Mutual Consent • No Particular Proportion has been prescribed by the Shariah • May agree on different ratio of Profit 40 % Mubarib, 60% RabbulMaal or viseversa Lump sum Amount of Profit Not Allowed: Capital -------------> Rs. 100,000 Profit ---------------> Rs. 10,000 of the Mudarib Profit 2 -------------> 20 % of Capital of RabbulMaal

  8. Profit Distribution in Mudarbah • Mudaribcannot claim any periodical salary in addition to proportion of profit. • Business trip outside own city by the mudarib can claimed for personal expenses, accommodation, food, etc., • Loss in some Transactions will be offset by the Profit earned in some other transactions before distribution of remainder. • The partner who has expressly excluded himself from the responsibility of work for the business cannot claim more than the ratio of his investment.

  9. Termination of Mudarabah • Can be terminated at any time • Give Notice to other Party • Difference of Opinion “All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful”…. Hadith • Asset in form of Cash --------> Distribute according to the agreed Ratio • Asset in other Form --------> Mudarib may sell it liquidate them , Distribute it

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